Could Apple take on Netflix with original content?
In the face of not so meteoric sales of iPhones and iPads, reports suggest that Apple is contemplating a move into commissioning its own original premium content in genres beyond the music-related formats that accompany its Apple Music service (see Carpool Karaoke, Dre series, etc).
While details are still scant – Apple being a notoriously secretive company – if Apple is serious about broadening its offering to become a media business rather than just a technology focused company, any analyst would say that it had three options if it wanted to become a serious competitor to the likes of established rivals such as Netflix or Amazon. These are build, partner or buy. So let’s think them through.
1. Build
Building a service in the face of so many established competitors, such as Netflix and Amazon Prime, from pretty much a standing start seems an unlikely one. The two requirements are a paying subscriber base and a content catalogue (more original owned the better). And between Netflix and Amazon, Apple has competition that’s already ‘there’ for customers and providing a great service.
On catalogue alone, Netflix aims for 50% “originals” within 4/5 years, from an already strong position. On subscribers, taking Apple Music as the example, it has half the number of subscribers as Spotify despite the marketing and hardware install base available to it. Building – for this market – is hard.
2. Partner
Partnerships aren’t generally Apple’s thing, and it’s unlikely to want to dip its toe in a market as expansive as this. While a partnership with a major studio might be an option, it would still have to build its subscription base from scratch (see point 1).
3. Buy
Markets love it when winners get together. And Netflix stock is climbing as analysts approve of their international subscriber growth prospects, this can only make it more attractive for Apple. And for Apple, which last year approached Time Warner before its eventual acquisition by AT&T, this seems to be the smartest option.
Netflix purports to have the original content business model licked; it has the experience and expertise, and it has the large subscriber base, and great marketing and distribution that is proven for its product. Apple would be able to complement this offering and potentially accelerate further subscriptions.
So from this limited breakout, one could surmise Apple’s most likely to buy its way into this. And it has form in purchasing businesses that it considers strategically important, such as Beats and Siri. So I guess the question is: is owning original content strategically important to Apple?
As a thought experiment, imagine what Steve Jobs would think of all this. Apple has developed a great deal since his passing, but holds true to his fundamentals, one of which was a focus on paring the best hardware with the best software to create the best holistic experience.
Is content the software to Apple’s future hardware? It’s not like ‘content’ (films, TV, music, images) is ‘new’: Steve never stood up and suggested Apple could make better music than musicians (one of his proudest moments was when the Beatles became available on iTunes). So what would he make of presuming Apple could do content better than existing, highly experienced content creating and commissioning businesses?
So while Apple may be more likely to buy Netflix than build a rival, its founder may have disapproved of the whole affair entirely…
Nick Bourne is chief commercial officer at Bigballs Media